5 Small Business Tax Deductions That You Might Be Missing

When the time comes to do your business tax return, there are many expenses that you can claim to lower your taxable income. However, with the ATO cracking down on deductions more than ever before, a simple oversight can have severe ramifications for you and your small business.

Because of this, many small business owners are left unsure of what they can and can’t claim. This often leaves them missing out on several important deductions, decreasing their income and hurting their business too. To help take some of the pressure off, we’ve compiled this list of potential deductions you can claim when completing your business tax return this financial year.

1. Prepaid expenses

One deduction that you can make is your running expenses, including ones that you pay for in advance. By prepaying certain expenses before June 30, you can increase your allowable deductions for the year that you paid them. These expenses have to have a service period of 12 months or less, such as bills or professional subscriptions.

It is worth noting though that if you do this, you won’t be able to claim these same deductions in the next financial year and the amount of tax you pay will increase due to this.

2. Deductions for personal super contributions

For those under 75, in certain circumstances, you can claim a deduction for any personal super contributions to an eligible fund. If you’re aged between 67 to 74, to do this you meet the work test, which requires you to have been employed for a minimum of 40 hours over 30 straight days during the financial year.

Those aged 67 to 74 can also make voluntary contributions for another 12 months from the end of the financial year where you last met the work test. Your super balance must also be under $300,000 before the financial year of your contributions, and once you’ve used the work test exemption for one financial year you cannot do so again.

To make a tax-deductible contribution, you need to submit a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form to your chosen super fund. If approved, you’ll receive an acknowledgment for a valid notice from your super fund in writing.

3. Some business travel expenses

When it comes to traveling for work, there are certain expenses you can claim on your tax return. This includes areas such as accommodation, public transport or ride-sourcing, airfare, car hire and meals (if you’re staying overnight). You’ll need to retain records of all of these costs, such as receipts, tax invoices and boarding passes as proof.

If you’re traveling for more than five nights, you’ll also need to keep a travel diary of all the business activities you partake in, including where you went and what time you were there. Some expenses that you can’t claim are visas, passports and travel insurance, gifts and souvenirs and the added costs of taking a friend or family member on the trip with you. 

4. Depreciation of business assets

Generally, when a business purchases fixed assets, deductions are not immediately available. What happens instead is that the cost of the asset is claimed over time, as it slowly depreciates in value. This is known as tax depreciation, a complicated process in that rules are impacted from case to case by both the asset and how it’s used.

In some cases, certain small businesses can use simplified depreciation rules to make their claim. We recommend finding out more from the ATO website or a qualified tax agent.

5. Instant business asset write-off

Some business assets, such as vehicles and machinery, can be claimed the year that they were purchased. Certain rules apply to the type of businesses that are eligible and what they can claim, but if you meet these requirements then you can claim these purchases as long as they were installed and ready for use within the time frame specified by the ATO.

If your business has an aggregated turnover of less than $50 million, you can even claim the full cost of second-hand purchases that cost under $150,000. There are many more rules and regulations regarding this process, so make sure you seek the advice of a tax advisor and fully understand the limitations.